Chapter 5 Decisions-making

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1 Chapter 5 Decisions-makingThe decision-making processThe rational modelThe common errors in the decision-makingTypes of problems, decisions and level in the organizationDecision-making stylesMaking-decision in groups

3 Exhibit 5-2 Assumptions of RationalityThe problem A single, All alternatives Preferences Preferences No time Final choiceis clear and well-defined and are clear are constant or cost will maximizeunambiguous goal is to consequences and stable constraints economicbe achieved are known exist payoffLeadtoRational Decision MakingExhibit 5-2 Assumptions of Rationality

4 Bounded RationalityThis is the behavior that people construct simplified models that extract the essential features from problems without capturing all of their complexities in order to decide rationally.

5 Availability heuristicThis is the tendency to base judgments on information that is readily available.Representative heuristicThis is the tendency for people to base judgments of probability on things with which they are familiar.Escalation of commitmentIt refers to an increased commitment to a previous decision despite negative information

6 Exhibit 5-3 Types of Problems , Decisions and Level in the OrganizationIll-structuredType of problemWell-structuredTopLowerProgrammeddecisionsNonprogrammed

7 Types of ProblemsWell-structured problems are problems that are straightforward, familiar to the decision maker, and the goal is clear, the information about them are complete.Ill-structure problems are new, or unusual, and information about such problems is ambiguous or incomplete.

8 Types of DecisionsProgrammed decision is a repetitive decision that can be handle by a routine approach. (Procedure, rule, policy)Non-programmed decision is a decision that must be custom-made to solve unique and non-recurring problems.

10 The Advantages and Disadvantages of Group Decision MakingMore complete informationMore alternativesIncreasing acceptance of a solutionIncreasing legitimacy and democracyAdvantagesTime-consumingMinority dominationPressures to conform (groupthink)Ambiguous responsibilityDisadvantages

11 Several Effective Ways of Group Decision-MakingBrainstormingThis is an idea-generating process that encourages alternatives while withholding criticism.Nominal group techniqueThis is a decision-making technique in which group members are physically present but operate independently.

12 Delphic techniqueThis is a decision-making technique in which participants are specialist in some field, they are not necessary to assemble together, and required to write solution alternatives anonymously.Electronic meetingThis is a type of nominal group technique in which participants are linked by computers.

13 Study & Practice How to organize an effective meeting?What’s the actions of the bounded-rational decision maker?What’s the advantages and disadvantages of group decisions?Understand several important ways of group decision